Gold markets continue to meander around the $1070 level, as we are dealing with the last significant cluster between here and the $1000 level. It is down at $1000 that we feel the buyers will step back into this marketplace, so we are definitely interested in watching the price action in that general vicinity. We believe that the markets will be waiting, and if you listen to all of the pundits, it appears that most people are now looking at that level.
While I recognize that it is a major round number, the truth of the matter is that this is essentially a “zone”, and as a result I’m not going to start selling gold if we drop to $998. In other words, I am just looking for a supportive candle somewhere in that vicinity, as the market should respect that level. I remember personally how difficult it was to break out of that region several years ago, and as a result it does not surprise me at all that we see a bit of “market memory” appear in this general vicinity.
Remember, it is Warren Buffett who said “I buy when people are selling and vice versa.” (Okay, fair enough, it’s not a direct quote but it’s essentially what the man said.) In other words, the markets have gotten so bearish on gold, then I feel there are a lot of speculators out there believing that this trend is going to continue forever. Even if we did break down from here though, I see a significant amount of noise between here and $750 to keep me from actually selling.
The longer I trade, the more I realize that you have to pay attention to the longer term. In fact, I cannot tell you how many times I’ve looked at the chart in said “If I had only bought here, I would’ve made a minor fortune.” I think this is going to be one of those times as going into the future it will look obvious. However, that’s not to say that it’s going to be easy to hang onto the trade, and as a result you will have to be careful, trade position size is that you can deal with, and simply let the trade do what it will. We are buyers closer to the $1000 handle.
We will alert you to when we start buying gold, and how we decide to do it. After all, futures markets contracts can get expensive, so we may choose to do it in a much more subdued manner.